The Lex Newsletter: Amazon battles Shein’s shoo-in potential

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Dear reader, 

When Amazon.com announces a rare, sharp cut to fees for merchants selling clothing priced below $20, you know rivalry in that space has intensified. A price war with platforms such as Chinese fast-fashion upstart Shein may help draw back any straying shoppers to the US ecommerce platform. But it may also bring more attention to Shein’s upcoming listing, expected to fetch a valuation of as much as $90bn. 

Cost of living pressures caused by rising inflation have increased demand for ultra low-cost goods, especially clothes, which has been a boost for Chinese products. Amazon wants to win back these price-sensitive consumers. On Tuesday, it announced it would reduce seller fees on clothing priced below $15 to 5 per cent from January. 

That is a big cut from the previous 17 per cent. The commission on clothing priced from $15 to $20 will drop to 10 per cent. 

The reduction comes as Shein, known for its ultra-cheap clothing under $10, has brazenly parked itself on Amazon’s turf. It aims to become a marketplace platform, moving beyond its own clothing brand.

It will expand from focusing on fashion and lifestyle for Generation Z shoppers to offering a much broader range of products. Even before the shift, its more than 600,000 products for sale on its platform have been attracting more users and web-surfing time.

This is a bold move. Amazon dominates US ecommerce with about 38 per cent market share online. But three of the largest rising threats to its market share in the US — Shein, TikTok and Temu — have social media trends in their favour.

All three have their roots in China. Fast-fashion group Shein, short video app TikTok and shopping app Temu have benefited from rapidly changing clothing trends led by influencer videos and their endorsements.

Ecommerce growth at TikTok owner ByteDance has driven its revenues to a fresh record and pushed its latest quarterly earnings before interest and tax to $9bn. Its $50bn cash pile has enabled it to launch a share buyback from investors.

Temu’s sales growth has turbocharged parent PDD’s stock and earnings. Its share price has more than doubled from a May low after sales in the September quarter also doubled.

For Shein, huge demand for its clothing lifted its sales to $23bn last year, making it a profitable company and preparing it to become one of the biggest listings of the past decade.

There are risks. A listing will mean more scrutiny. While Shein has denied all allegations, US lawmakers want Shein to disclose employment practices that they allege include forced labour. There have also been claims of import violations.

In addition, the company will need to keep up with high expectations about its revenue and user growth, which have been increasing by more than 40 per cent a year.

But Shein also has much to gain. A listing will mean more resources to expand in the US, which is reported to be its biggest market. It will also give it more than enough cash to increase its global user base, which has already surpassed 100mn registered users, and market share.

Cheap hoodies are unlikely to spark as much official concern as artificial intelligence chips and telecoms equipment. At the very least, a US listing, at anything close to a $90bn valuation, would bring extensive publicity and marketing for Shein and its products.

Elsewhere in Asia

China’s push to internationalise its currency is making gains against the odds, writes Spanish economist Alicia García-Herrero. Geopolitical concerns have helped support the use of the renminbi despite weak foreign direct investment trends.

Meanwhile, I enjoyed this column on why staff loyalty is not always a good thing. Open AI chief executive Sam Altman received an impressive show of support from more than 700 staff after he was fired but this level of loyalty may not always be a good thing.

Enjoy the rest of your week,

June Yoon
Lex Asia editor
lexfeedback@ft.com